4G auction 'could affect UK operator competition'

Revenue challenges and the cost of investment will mean UK mobile operators will not continue in their current state after the 4G auctions, according to new research.

A global analysis of the mobile market by law firm Freshfields claimed the UK may not be able to preserve competition in the market following the 4G auction, which will take place next year.

Natasha Good, partner in Freshfields’ telecommunications, media and technology sector, said while operators paid out more than $150bn for 3G licences around the world during the past 10 years, almost a third of operators involved in auctions failed to deliver 3G services. More than half (55%) of operators failed to hit deadlines for rollout of 3G services.

Good said the high cost of implementing 3G network infrastructure led to market consolidation, like Orange’s merger with T-Mobile. She said: ‘Competition and expectations of charging consumers of data service encouraged operators to pay high prices for 3G licences. But they also paid the price of finding it difficult to fund 3G infrastructure.’

Last week, Ofcom said it expects the rollout of 4G to start during the 2013/14 financial year, with ‘wide availability’ due from 2015. Operator infighting has led to the auction being pushed back several times.

Good said the UK auction could follow the same route as the German auction last year. Vodafone, T-Mobile, Telefonica and E-Plus won the auction, although the latter pulled out of the bidding, leading to rumours about consolidation in the German market.

She added: ‘The UK’s draft auction rules explicitly aim to preserve competition but as we’ve seen with 3G and Germany’s auction of 4G, it’s debatable whether the UK mobile market will realistically continue long-term in its current form post-4G. Mobile termination rates (MTRs) are being squeezed, voice is declining and there’s a huge amount of data coming across the networks. Where will the revenue be coming from?’